Digested by: ra osorio

Guingon vs. Del Monte

FACTS:Julio Aguilar owned and operated several jeepneys. He entered into a contract with
the Capital Insurance & Surety Co., Inc. insuring the operation of his jeepneys against
accidents with third-party liability. The insurance policy contains the following provisions:

Section II LIABILITY TO THE PUBLIC

1. The Company, will, subject to the limits of liability, indemnify the Insured in the event
of accident caused by or arising out of the use of the Motor Vehicle/s or in connection
with the loading or unloading of the Motor Vehicle/s, against all sums including
claimant's costs and expenses which the Insured shall become legally liable to pay in
respect of:
a. death of or bodily injury to any person
b. damage to property

Iluminado del Monte, one of the drivers of the jeepneys operated by Aguilar, bumped with
the jeepney abovementioned one Gervacio Guingon who had just alighted from another
jeepney and as a consequence the latter died some days thereafter.

The heirs of Gervacio Guingon filed an action for damages praying that the sum of
P82,771.80 be paid to them jointly and severally by the defendants, driver Iluminado del
Monte, owner and operator Julio Aguilar, and the Capital Insurance & Surety Co., Inc. For
failure to answer the complaint, Del Monte and Aguilar were declared in default. Capital
Insurance & Surety Co., Inc. answered, alleging that the plaintiff has no cause of action
against it based on the following provision:

E. Action Against Company

No action shall lie against the Company unless, as a condition precedent thereto, the
Insured shall have fully complied with all of the terms of this Policy, nor until the amount
of the Insured's obligation to pay shall have been finally determined either by judgment

against the Insured after actual trial or by written agreement of the Insured, the
claimant, and the Company.
Any person or organization or the legal representative thereof who has secured such
judgment or written agreement shall thereafter be entitled to recover under this policy
to the extent of the insurance afforded by the Policy. Nothing contained in this policy
shall give any person or organization any right to join the Company as a co-defendant in
any action against the Insured to determine the Insured's liability.
Bankruptcy or insolvency of the Insured or of the Insured's estate shall not relieve the
Company of any of its obligations hereunder.

Capital Insurance & Surety Co. contends that the "no action" clause in the policy closes the
avenue to any third party which may be injured in an accident wherein the jeepney of the
insured might have been the cause of the injury of third persons, alleging the freedom of
contracts.

ISSUE: WON the heirs of Guingon have a cause of action against Capital Insurance

RULING: Yes. The policy in the present case is one whereby the insurer agreed to
indemnify the insured "against all sums . . . which the Insured shall become legally liable to
pay in respect of: a. death of or bodily injury to any person . . . ." Clearly, therefore, it is
one for indemnity against liability; from the fact then that the insured is liable to the third
person, such third person is entitled to sue the insurer

The right of the person injured to sue the insurer of the party at fault (insured), depends on
whether the contract of insurance is intended to benefit third persons also or only the
insured. And the test applied has been this: Where the contract provides for indemnity
against liability to third persons, then third persons to whom the insured is liable, can sue
the insurer.

The next question is on the right of the third person to sue the insurer jointly with the
insured. The policy requires, as afore-stated, that suit and final judgment be first obtained
against the insured; that only "thereafter" can the person injured recover on the policy; it
expressly disallows suing the insurer as a co-defendant of the insured in a suit to determine

the latter's liability. As adverted to before, the query is which procedure to follow that of
the insurance policy or the Rules of Court.

The Rules of Court provide that parties may be joined either as plaintiffs or defendants, as
the right to relief in respect to or arising out of the same transactions is alleged to exist
(Sec. 6, Rule 3). The "no action" clause in the policy of insurance cannot prevail over the
Rules of Court provision aimed at avoiding multiplicity of suits.

Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of
Rule 3 on "Permissive joinder of parties" cannot be superseded, at least with respect to
third persons not a party to the contract, as herein, by a "no action" clause in the contract
of insurance.